Question

harmon recycling services (hrs), a not-for-profit organization, has two drop-off centers, westside and eastside. data for the expected operation in the next quarter follow. eastsidewestsidetotal clients25,0006,25031,250 revenues$ 270,000$ 180,000$ 450,000 staff hours8,1002,70010,800 staff costs$ 99,000$ 81,000$ 180,000 general operating costs $ 270,000 required: compute the predetermined overhead rate used to apply general operating costs to the two centers assuming hrs uses the number of clients to allocate general operating costs. based on the rates computed in requirement (a), what is the expected surplus (revenues less costs) for each center?

Answer 1

The predetermined overhead rate is calculated at $8.64 per client, resulting in a surplus of $45,000 for the Westside center and a deficit of $45,000 for the Eastside center after allocating the general operating costs based on the number of clients and considering staff costs and revenues.

Step-by-step explanation:

To solve for the predetermined overhead rate using the number of clients to allocate general operating costs to HRS's two centers, we divide the total general operating costs by the total number of clients. After that, we can multiply this rate by the number of clients at each center to find the allocated general operating costs for each center. Finally, we subtract the sum of staff costs and the allocated general operating costs from the revenue to determine the expected surplus for each center.

Calculating Predetermined Overhead Rate

Total general operating costs = $270,000
Total clients = 31,250
Predetermined overhead rate = Total general operating costs / Total clients = $270,000 / 31,250 = $8.64 per client.

Allocating Costs and Calculating Surplus

For Westside:
Revenues = $180,000
Allocated General Operating Costs = 6,250 clients * $8.64 per client = $54,000
Staff Costs = $81,000
Surplus = Revenues - (Allocated General Operating Costs + Staff Costs) = $180,000 - ($54,000 + $81,000) = $45,000.

For Eastside:
Revenues = $270,000
Allocated General Operating Costs = 25,000 clients * $8.64 per client = $216,000
Staff Costs = $99,000
Surplus = Revenues - (Allocated General Operating Costs + Staff Costs) = $270,000 - ($216,000 + $99,000) = -$45,000 (deficit).